This is a very popular question we get asked on a daily basis.
Why? Well because the developer isn’t always sure exactly what they need.
Their profession is renovating or building new houses, so how should they know?
The issue is, the property developer will often contact a few brokers who do not necessarily specialise in the field of property insurance. They may be given false information and as to what is required and may not be fully informed of the different types of policies needed to keep him fully covered.
An insurance check list for Property Developers :
- Is there Insurance for the existing structure in place (if there is one).
- Do you have contractors all risk insurance policy in place
- Check whether you need to take out a JCT contract (non negligence insurance).
So going from point 1, if there is an existing structure in place which you are renovating or converting you will need to get the correct building insurance in place for this unoccupied property.
Be careful though as not all policies for unoccupied property insurances are straight forward and they come with many endorsements and can exclude a lot of perils.
When insuring unoccupied buildings, be sure to check what cover you have.
Unoccupied Buildings Insurance
There are usually 3 levels of cover for unoccupied buildings insurance :
Unoccupied Level 1 – this will cover you for FLEEA cover only, which stands for Fire Lightening Earthquake Explosion and Aircraft damage.
As you can see this is very basic and will not cover you for perils such as malicious damage, flood, subsidence etc.
Unoccupied Level 2 cover – this will cover you for full perils, theft, malicious damage and escape of water.
Unoccupied Level 3 cover – this is the one that gives you full peril cover, including accidental damage subsidence, flood, escape of water etc.
So choosing the right option for the building insurance cover is imperative as you don’t want to be cutting corners to save a few quid, as this usually comes back to bite!
I would always advise full perils as unoccupied building insurance policies can be taken out and cancelled on a pro rata basis, so at first look it might seem expensive, but if you are cancelling after 6/8 months the premium gets pro rata‘d up on a fair basis.
The last thing to check is that the insurer is fully aware of the building works which are being carried out. Not all unoccupied property insurance policies are set out to cover the risk of major refurb, so if there was a claim and the assessor went along to the site to discover major building works, a potential claim would be rejected.
Many insurers who insure unoccupied property only cover up to 50K of renovation works, so you must, from the off explain what you are doing and declare the cost of works!!
Having a comprehensive Contractors All risk policy in place
If you are the main developer it is crucial you protect yourself as the main contractor against other contractors working for you.
Why, well simply because their insurance policies might not be adequate enough to cover what you need on your site.
Example: Say you took on a bona fide sub-contractor who presented you with his Liability Insurance policy, only for this to have been cancelled months ago due to non-payment.
What would happen then if you the contractor/property developer didn’t have a policy in place to protect yourself against his failure to provide insurance …. the result would be you would have to end up paying for any damage caused.
Contractors All Risk Insurance policies can be taken out for a single one-off contract or to cover multiple contracts over the course of the year.Or you can take out a Contractors All Risk Insurance policy which will also cover the existing structure as well for a one-off contract.
If the developer is not doing the build but is employing the contractor, they can also have a Contractors all risk policy in place where both his name and the contractor’s name are placed on the policy.
These policies can also be combined with insuring the structure and a JCT contract which we will come onto below.
There are a few different options, but failing to have one in place is putting your investment at stake.
Nowadays many banks who lend money to developers realise this and request to be placed as a noted interest on any policy, firstly so they know one is active and secondly so they know they will be paid if there was to be a claim.
So with that in mind, you need to make sure you have this in place, because if you don’t then you leave yourself wide open to a potential claim.
JCT Insurance 21.2.1 or Non-Negligence Insurance
JCT Insurance is basically non-negligence insurance and is in place to protect the employer. In this case, the employer is the property developer. It protects against any unforeseen damage to third party property due to the contracted works which have taken place.
There is a legal precedent from 1958 which places responsibility on employers for any damage caused to surrounding buildings on construction sites.
Many people get non-negligence insurance mixed up with damage being caused the contractor or poor workmanship.
This is not true, non-negligence covers you for damage which has been caused mainly to the ground which has been almost impossible to forsee by any previous plans which were initially drawn up.
The main type of damage refers to, subsidence, heave, vibration, weakening or removal of support or lowering of ground water.
So if you are a property developer and you are building a large new build in close vicinity to other properties and you do not have a non-negligence contract in place any potential claim will fall on you.
The potential claims are usually to do with ground movement and causing heave and subsidence damage to neighbouring properties.
So there we have it, a small guide as to what insurance a property developer would need to protect themselves. Remember, claims do happen and by not insuring properly you’ll be gambling with a lot of money if you’ve decided to turn a blind eye as to what you should have in place.
Call one of our Contractors Insurance Specialists for further help 02084407400.
